ICICI Bank warns against increased regulatory scrutiny

Private sector lender ICICI Bank has warned against increased regulatory scrutiny and reputational risks due to the ongoing investigation against its CEO Chanda Kochhar. The bank in a filing with the US Securities and Exchange Commission (SEC) has also cautioned that if any bank official is found guilty it could adversely impact its operational results and financial condition.

“In the event that the Bank or individuals associated with the Bank are found by the independent enquiry, the SEBI enquiry or the CBI investigation to have violated applicable laws or regulations, the Bank or individuals associated with the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations, financial condition and reputation,” the bank said in an annual filing to the US securities regulator.

“We are at increased risk for inquiries or investigations by regulatory and enforcement authorities, which may adversely affect our reputation, lead to increased regulatory scrutiny, cause us to incur additional costs or adversely affect our ability to conduct business.”

ICICI Bank has been in the midst of series of charges against its CEO Kochhar that first began in 2016. Multiple whistle blowers have alleged that she failed to disclose the business relationships her husband Deepak Kochhar had with some of the corporations to which ICICI Bank sanctioned loans in which she was instrumental. The charge is that some of the loans to Videocon and Essar Groups were granted as a quid pro quo for business dealings with her husband Kochhar. But the ICICI Board had denied charges.

The bank also for the first time publicly acknowledged that the Board of Directors have instituted an independent enquiry, headed by former Supreme Court Judge, Justice B. N. Srikrishna to probe allegations of quid pro quo against Kochhar. The independent enquiry was being supported by an independent law firm and a forensic firm, the bank said.

“The Audit Committee of the Bank has instituted an independent enquiry, headed by a former Supreme Court Judge, to consider various allegations relating to the MD and CEO, Ms. Chanda Kochhar is on a leave of absence pending the outcome of the independent enquiry,” the filing made to US SEC said. “The allegations include nepotism, quid pro quo and claims that Ms. Kochhar, by not disclosing conflicts of interest caused by certain transactions between certain borrowers of the Bank and entities controlled by Ms. Kochhar’s spouse, committed infractions under applicable regulations and the Bank’s Code of Conduct.”

In May this year, SEBI had issued a show-cause notice to Kochhar and ICICI after multiple whistleblower allegations surfaced. The bank submitted that it was responding to the relevant allegations made in the notice which pertain to ICICI. It also acknowledged that the Central Bureau of Investigation has initiated a preliminary enquiry against various individuals and firms including unknown officers and officials of the Bank.

In June, ICICI Bank had informed that Kochhar will go on leave pending investigation and Sandeep Bakhshi was appointed as Chief Operating Officer to run the bank’s day-to-day operations. The Reserve Bank of India on Wednesday approved the appointment of Bakhshi as COO for a period of three years.

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